CHAPTER 7
END OF CHAPTER MATERIAL
Discussion Questions
1. How does market segmentation differ from market targeting? (AACSB: Communication)
Answer:
Market segmentation involves dividing a market into smaller groups of buyers with distinct needs,
characteristics, or behaviors that might require separate marketing strategies or mixes. The company
identifies different ways to segment the market and develops profiles of the resulting market segments.
Market targeting (or targeting) consists of evaluating each market segment’s attractiveness and selecting
one or more market segments to enter.
2.
Name and describe the four major sets of variables that might be used in segmenting consumer
markets. Which segmenting variables does Starbucks use? (AACSB: Communication; Reflective
Thinking)
Answer:
Consumer markets are typically segmented using four major variables: geographic, demographic,
psychographic, and behavioral variables.
Geographic segmentation calls for dividing the market into different geographical units such as nations,
regions, states, counties, cities, or even neighborhoods.
Demographic segmentation divides the market into groups based on variables such as age, gender, family
size, family life cycle, income, occupation, education, religion, race, generation, and nationality.
Psychographic segmentation divides buyers into different groups based on social class, lifestyle, or
personality characteristics. People in the same demographic group can have very different psychographic
makeups.
Behavioral segmentation divides buyers into groups based on their knowledge, attitudes, uses, or responses
to a product. Buyers can be grouped according to (1) occasions when they get the idea to buy, actually make
their purchase, or use the purchased item, (2) the benefits people look for in the product class, (3) user status
(nonusers, ex-users, potential users, first-time users, and regular users of a product), (4) usage rate (light,
medium, and heavy product users), and (5) loyalty status.
Starbucks Coffee uses a combination of geographic, demographic, behavioral, and psychographic
segmentation. It started primary in urban locations (in some cases locating two or more outlets within sight
of each other) but now has expanded into suburbs as well. Paying $3 or more for a cup of coffee is beyond
many consumers’ means, so Starbucks in not targeting every consumer. Psychographic segmentation is
being used as well, encouraging customers to hang around the neighborhood barista, listen to and purchase
trendy music, and satisfy cultural interests, such as environmentalism and movies that are often promoted
through Starbucks outlets. Behavioral segmentation is being used as well, by offering variety in different
coffee drinks as well as rewarding loyalty with its new loyalty program, by which customers can load a
Starbucks card and register it on the Starbucks Web site. This allows Starbucks to capture behavioral data
and reward loyal customers.
3.
Name and describe the levels at which market targeting can be carried out. Give an example of a
company using each. (AACSB: Communication; Reflective Thinking)
Answer:
Market targeting can be carried out at several different levels. Companies can target very broadly
(undifferentiated marketing), very narrowly (micromarketing), or somewhere in between (differentiated or
concentrated marketing). Using an undifferentiated marketing (or mass marketing) strategy, a firm might
decide to ignore market segment differences and target the whole market with one offer. Such a strategy
focuses on what is common in the needs of consumers rather than on what is different. The company designs
a product and a marketing program that will appeal to the largest number of buyers. Using a differentiated
marketing (or segmented marketing) strategy, a firm decides to target several market segments and designs
separate offers for each. Toyota Corporation produces several different brands of cars—from Scion to
Toyota to Lexus—each targeting its own segments of car buyers. And P&G markets six different laundry
detergent brands in the United States, which compete with each other on supermarket shelves. Using a
concentrated marketing (or niche marketing) strategy, instead of going after a small share of a large market,
a firm goes after a large share of one or a few smaller segments or niches. For example, Whole Foods thrives
by catering to affluent customers that the Walmarts of the world can’t serve well. Micromarketing is the
practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations.
Rather than seeing a customer in every individual, micromarketers see the individual in every customer.
Micromarketing includes local marketing and individual marketing. For example, Harley-Davidson’s H-D1
factory customization program lets customers explore some 8,000 ways to “configure a Harley-Davidson
motorcycle to create your own masterpiece—a truly one-of-a-kind ride.
4. Explain how companies segment international markets. (AACSB: Communication)
Answer:
Companies can segment international markets using one or a combination of several variables. They can
segment by geographic location, grouping countries by regions such as Western Europe, the Pacific Rim, the
Middle East, or Africa. Geographic segmentation assumes that nations close to one another will have many
common traits and behaviors. World markets can also be segmented on the basis of economic factors.
Countries might be grouped by population income levels or by their overall level of economic development.
A country’s economic structure shapes its population’s product and service needs and, therefore, the
marketing opportunities it offers. Countries can also be segmented by political and legal factors such as the
type and stability of government, receptivity to foreign firms, monetary regulations, and amount of
bureaucracy. Cultural factors can also be used, grouping markets according to common languages, religions,
values and attitudes, customs, and behavioral patterns. Segmenting international markets based on
geographic, economic, political, cultural, and other factors assumes that segments should consist of clusters
of countries. However, as new communications technologies, such as satellite TV and the Internet, connect
consumers around the world, marketers can define and reach segments of like-minded consumers no matter
where in the world they are. Using intermarket segmentation (also called cross-market segmentation), they
form segments of consumers who have similar needs and buying behaviors even though they are located in
different countries.
5.
Explain how a company differentiates its products from competitors’ products. (AACSB:
Communication)
Answer:
A company can differentiate itself from competitiors along the lines of product, services, channels, people,
or image. Through product differentiation, brands can be differentiated on features, performance, or style
and design. Beyond differentiating its physical product, a firm can also differentiate the services that
accompany the product. Some companies gain services differentiation through speedy, convenient, or
careful delivery. Firms that practice channel differentiation gain competitive advantage through the way they
design their channel’s coverage, expertise, and performance. Companies can also gain a strong competitive
advantage through people differentiation—hiring and training better people than their competitors do.
Even when competing offers look the same, buyers may perceive a difference based on company or brand
image differentiation. A company or brand image should convey a product’s distinctive benefits and
positioning. Developing a strong and distinctive image calls for creativity and hard work.
6.
In the context of marketing, what is a product’s “position”? How do marketers know what it is?
(AACSB: Communication)
Answer:
A product’s position is the way the product is defined by consumers on important attributes—the place the
product occupies in consumers’ minds relative to competing products. Marketers often prepare perceptual
positioning maps to show consumer perceptions of their brands versus competing products on important
buying dimensions. Figure 7.3 is an illustration, and the position of each circle on the map indicates the
brand’s perceived positioning on two dimensions and the size of each circle indicates the brand’s relative
market share.
Students should understand that marketers actively try to influence a product’s position through their
selection of a differentiation and positioning strategy.